Looking for the most effective Forex strategies? In this article we will discuss two Forex strategies that can improve your trading.
You may already know that discipline is the most important thing in trading. The question is how to be a disciplined trader and follow the rules.
One way to help maintain discipline on Forex is the strategy you will stick to.
If this Forex trading strategy has worked well, you can be sure that you are using one of the successful Forex trading strategies. This confidence will make it easier to follow the rules of your strategy, and will help to be more disciplined.
Very often, when people talk about Forex trading strategies, they talk about specific methods of Forex trading, which is usually only part of the trading plan. Consistent successful Forex trading strategies provide good entry signals, but it is also important to consider:
-The main direction of the trend
How to determine what is the best trading strategy for You
Each trader chooses a strategy himself, based on his free time and risk appetite This means that You need to consider your personality and work out a strategy that suits you.
What can work very well for one trader may be completely unacceptable for another. Conversely, a trading strategy that has been underestimated by others may prove suitable for you.
Therefore, only in the course of testing various strategies and approaches, you will be able to find the right one and dismiss those that do not suit you.
One of the key aspects to consider is how much time you can devote to trading.
Below are some trading styles: from short time frames to long ones, which have been widely used in recent years and still remain a popular choice from the list of the best Forex trading strategies in 2017.
1. Scalping-this is a very short-term transactions that open for a few minutes. Scalper seeks to quickly make a profit in a few points. Usually, tick charts are used, such as those that can be found in MetaTrader 4 Supreme Edition.
2.Intraday trading. These are trades that remain open throughout the day, as the name suggests. This eliminates the possibility of adverse effects of large pulses. Trades can last only a few hours and the timeframe can be set to one or two minutes.
3.Swing trading. Positions held for several days in order to profit from short-term price formations.
4.Positional trading. A long term trader usually looks at the charts at the end of the day.
The role of price patterns in Forex trading strategies
Almost all traders, to some extent, use price models in their trading.
This is also known as technical analysis.
When it comes to strategies based on technical analysis, there are two main styles: trend following and counter-Trend trading. Both of these strategies of trading in the foreign exchange market are focused on making a profit when joining the price movement.
When it comes to price models, the most important concepts are support and resistance.
Simply put, these conditions represent the direction of the market, to determine the levels of support and resistance are often used minimum and maximum prices for the selected period of time. Support is a price level that is below the current price, resistance is higher.
This is because market participants tend to judge subsequent prices based on recent highs and lows.
What happens when the market is approaching recent lows? Buyers will be attracted by the low price of the asset, and sellers will be able to fix the profit.
What happens when the market approaches recent highs? Sellers will be interested in opening a short position at the highest prices, buyers at these levels fix their profits.
Thus, recent highs and lows are a criterion for assessing the current situation in the market.
There is also the support and resistance aspect. This is because market participants foresee a certain price movement at these points and act accordingly.
As a result, their actions can contribute to the development of the market, as they expected.
However, three things are worth noting:
1.Support and resistance are not 100 % the rule, they are just a common consequence of the natural behavior of market participants
1Trend-oriented systems take profit into account when support and resistance levels break down
3.Counter-trend trading styles are opposite to the following trend: they suggest entering the market when there is a new high and buying when there is a new low.
Forex trend trading strategies
Sometimes the market goes out of range, moving below the support or above the resistance, in this case, the trend begins. How it happens?
When support breaks down and the market moves to new lows, buyers begin to hold on. This is due to the fact that buyers constantly see that lower prices are set and want to wait until the minimum is reached.
At the same time, there will be traders who open trades in panic or simply have to close their positions. The trend continues until the sale is exhausted and buyers are reassured that prices will not decline further.
Trend-oriented strategies assume opening a position after they have overcome the resistance and sell levels after they have fallen from the support level. Trends can be dramatic and long-lasting.
Because of the scale of the movements involved, this type of system can be the most successful Forex trading strategy. Trend-oriented systems use indicators to tell when a new trend might start, but there's certainly no right way to know.
Advantages of Forex indicator-if the indicator can distinguish the time when there is a probability that the trend will start, you increase the chances in your favor. The situation that can show us that the trend is beginning to form is called a breakthrough.
A breakout is when the price moves above the highest high or lowest low in a specified number of days. For example, a 20-day upward breakthrough is when the price goes above the highest peak in the last 20 days.
System-oriented trends that require special thinking. Because of the long duration - during which time, profits can disappear as market fluctuations - these trades can be more stressful.
When markets are unstable, trends will be poorly traced and price fluctuations will be greater. This means that a trend-oriented system is the best trading strategy for Forex markets that are calm and trending.
An example of a simple trend strategy is the Donchian Trend system.
Donchian channels were invented by futures trader Richard Donchian and are indicators of trends that are set. The parameters of the Donchian channel can be adjusted as you see fit, but in this example we will consider a 20-day breakthrough.
In principle, the breakthrough of the Donchian canal suggests one of two things:
Buy if the market price is above the maximum for the previous 20 days
Sell If the price is below the minimum for the previous 20 days.
There is an additional rule for trading when the market condition is more profitable for the system. This rule is designed to filter breakouts that run counter to a long-term trend.
In short, you're looking at a 25-day moving average and a 300-day moving average. The direction of the slower moving average determines the direction that is allowed.
This rule says You can go:
If the 25-day moving average is below the 300-day moving average
If the 25-day moving average is higher than the 300-day moving average.
Trades are the same, but using a 10-day breakout. This means that if you open a long position and the market falls below the low of the previous 10 days, you want to sell to exit the trade, and Vice versa.
Learn to trade step by step with our educational courses.
Forex counter-trend Strategies
Counter-trend strategies are based on the fact that most breakthroughs do not develop into long-term trends. Therefore, a trader using such a strategy seeks to gain an advantage from the price trend to move away from the previously set highs and lows.
On paper, counter-trend strategies seem to be the best Forex trading strategies as they have a high rate of return.
However, it is important to note that more stringent rules are required on the risk management side. These Forex trading strategies are based on support and resistance levels. But there is a risk of big losses when these levels break down.
Constant monitoring of the market is a good idea. The market condition that is best suited for this type of strategy is stable and volatile. Such a market environment offers healthy price fluctuations that are limited within the range.
Remember, however, that the market can switch States. For example, a stable and quiet market can start a trend while remaining stable and then become volatile as the trend develops.
How the market may change is unknown.
One simple but profitable Forex strategy is based on a simple indicator called Simple Moving Average (SMA).
A simple Forex strategy based on the OSMA (Moving Average) indicator)
Strategies based on the SMA indicator give a good risk / profit ratio. This strategy can be called one of the most popular strategies in the Forex market, of course, in the case of its effective use.
With the help of SMA, you can determine the current direction of the price movement for the selected period of time, which in turn allows you to decide whether to open a deal for sale or purchase.
For example, if you set up a 12-period SMA and use it on a 15-minute timeframe when the price is higher, the situation is favorable for purchases.
Similarly, if the price of a currency pair falls below the 12-period SMA, this may be a sell signal.
This simple Forex trading strategy is great for beginners as it can be used on any timeframe and on any asset. In addition, you can easily combine SMA with other indicators. SMA is the basis of many trading systems.
But no matter how you act, be sure to test all Forex trading strategies with a demo account before using them on a real one. Another way that allows novice traders to try out various indicators is the trading simulator from Admiral Markets, which allows you to test the system much faster.
Advanced Forex strategy-Positional trading
You cannot predict which strategy will bring you the most success or profit in Forex trading. However, positional trading is definitely one of the most potentially profitable Forex strategies.
This advanced Forex strategy is used by leading traders, whose experience has allowed to earn money effectively in the foreign exchange market. Its advantage is that you do not need to constantly pay attention to it. However, you will only be able to close the trade after a thorough market analysis. Next, let's talk about positional trading in detail.
Positional trading involves holding positions for a long time - usually from one month to a year.
However, this requires a long-term plan and the ability to predict the future direction of the market.
To start working with positional trading, you must select an asset. There are three factors to consider when determining which currency pair to use.
1. High long-term volatility
Volatility is crucial for making a profit. Every day, with your trading can be held SWAP, so a tool that does not move may not be interesting.
One way to increase your chances of success is to choose the currency pairs whose movements may be affected:
Upcoming political developments
2. Low short-term volatility
A currency pair with low short-term volatility is more likely to move slowly towards your position rather than experiencing sharp fluctuations that may force you to close your position.
3. Use low margin
Although Forex traders often trade with very high leverage, this approach is not optimal for positional trading. To determine which margin to use for a profitable Forex strategy, consider the following variables:
the amount of funds you have outside your trading account - don't forget to trade with risk capital only
what leverage will provide the best risk-reward ratio.
When it comes to position trading, consider the following: the smaller the leverage, the better.
Each of the strategies discussed below has been developed specifically for novice traders who can potentially become professionals. So, let's analyze each of these strategies in more detail.
To become a successful trader, you need to know about all the nuances of working in the foreign exchange market. Work in this area involves a successful investment, which eventually will result in a decent income.
Understand that a reliable trading method that guarantees 100% success is nothing more than a myth. Any strategy is a risk, and none of them can insure you against losses. And yet, there are a number of advanced Forex trading strategies that will help you earn enough profit. Let's look at the first of them — Forex scalping strategy.
The task of scalping on Forex is to make a profit in the shortest possible time. This is its advantage: trades are conducted in the short term, so you get your income at the first market fluctuation, even if it is minimal. To learn how to extract the maximum possible benefit, before trading you need to analyze the Forex market very accurately. Day traders shared their experience of using this method.
Many participants in the foreign exchange market have a dual impression of this strategy. You have to understand how well it suits you. However, all of them agree on the basic idea of the method. After extensive analysis, many functions were combined into a General methodological idea.
After that, all traders who had different opinions about the effectiveness of scalping came to a common conclusion. They decided that scalping is a strategy that a trader can use to leave a trade as soon as possible. At the same time, the duration of these terms has not been specifically defined.
Forex scalping strategy can very quickly bring you considerable income. At the same time you need to know how best you can use it in practice. Let's look at this issue in more detail.
The most important point is to keep the position open for no more than 5 minutes. This can be seen as an advantage and at the same time as a disadvantage of scalping. The fact is that in 5 minutes the market will not move too much and your profit will be quite a small amount. Currency pairs move only in one direction by 1 or 2 points.
A small number of points will not bring you more profit. Thus, this system will be the most effective only if you move significant assets. Even a small fluctuation in the market will bring you more profit if the starting amount was considerable. Remember, trading volume and income will grow along with your skills and experience.
Considering the advanced methods of Forex trading, the similarity of the results of the strategy:
- Exit the transaction only after a few minutes after its opening. The maximum time is 5 minutes.
- Profit from one transaction will be small, so spend as many transactions. So you will collect a significant income in one day.
- A large number of transactions per day will make it possible to succeed in the strategy of scalping on Forex.
- The effectiveness of scalping only applies to day traders. You will have to spend a lot of time trading to make a profit.
As we mentioned earlier, you should never neglect the stop loss indicator. Scalping strategy is a very effective trading strategy. With it, you can explore the market from the inside, understand all its nuances and learn how to predict the outcome.
Advantages Of scalping on Forex
Positional trading, as one of the types of trading, is not suitable for everyone.
Many novice traders see trading as something more active when you need to constantly be behind the monitor and make a large number of transactions per day. Scalping, as one of the varieties of trading approaches, can give you that.
The idea of scalping strategy is to make a large number of transactions, each of which generates a small income - from five to ten points each.
Traders typically hold these positions for one to five minutes and spend the whole day monitoring buy or sell signals. Some of them, including Paul Rotter, receive a large income with this approach.
Rotter has acquired legendary status in the circle of scalpers and got the nickname Flipper for their quick trading actions. Rotter simultaneously opened buy / sell positions on the Eurex derivatives exchange. When traders reacted, he quickly collected profits.
One of the decisive factors in the success of Rotter was that he closely followed the orders.
To develop your own unique and profitable Forex trading strategy, consider the key variables:
Desired risk / reward ratio
Your attitude to stress
How much time per day you can devote to trading.
The most important thing is to use techniques you understand to improve your strategy every day. The free demo account is perfect for testing new ideas and working on your overall performance.
Forex strategy NFP
There is another strategy, which we will describe in General terms. NFP is a very important indicator in the economic world, one of the first to be published in the US every month.
Such news seriously affects the work of the day trader, because after them the price of currency pairs with the presence of USD moves. At the same time, the price fluctuates by 50 or more points. Unfortunately, you can use this trading strategy only once every 30 days, because it depends on the NFP indicator.
NFP can be attributed to the advanced Forex scalping system. Before the publication of the results of NFP in a few hours the market is starting to move. Here you need to try to predict the results of this indicator and understand how much these results will differ. All values can be found in the Forex calendar.
In addition, do not forget to check your margin. You need to be sure to hold on to the potential market movement before the world knows about the NFP results. After that, the price of the currency is likely to move significantly, with it in any direction. If you create a correct forecast about the market movement, you will get a considerable number of points in just a few hours.
Let's repeat and recall the importance of the stop loss indicator. If the market went in the opposite direction to the one you predicted, stop loss will not allow you to incur large losses. Simply put, a trading system that takes into account the NFP index will allow you to earn a considerable profit or make your losses minimal.
Simple trading strategies for beginners in the Forex market
How many traders in the market-so many strategies. Some are similar as two drops of water, some are radically different. One to follow simply, other, seems, impossible.
The first thing we have to figure out is what a simple Forex strategy is.
Here is the first mistake that most beginners, starting to communicate with the financial markets, often admits. Forex is not a faceless market, as it may seem after long hours of studying endless charts. Beginners do not see other traders next to them, as it was before, when trading was in the pit, and do not understand that everyone is trading against each other.
When selling or buying, always ask yourself: who is there on the other side of the market? If I am selling now, who is buying now and why? If I buy, who sells to me and why? As in the saying — look for a fool! If you can't find it, so the fool is…
The strategy should not be unique, enough zest. A trading advantage can come from, for example, the ability to withstand a large drawdown, or an additional fundamental condition that will limit some inputs and the like. But there must be an advantage. At least in your head.
This article provides an example of a simple technical strategy for Forex trading and a simple fundamental Forex strategy.
Best Forex strategies-Breakthrough
Trading breakthroughs is a perfect example of a simple Forex strategy that does not require a lot of time and effort, but can be tough for beginners who can not boast of patience.
Setting is everything. It is looking for the right setting, you will save yourself time and nerves. If the eye knows what it is looking for, the study of graphs is reduced to a second scan of the situation. If the setting is not the same-go ahead.
The setting for breakout trading is a horizontal market movement-a relatively narrow, relatively weak horizontal corridor, where bulls and bears are equal for some time.
We use a 200-period moving average on the daily chart. 200-day because about as many trading days a year. Simply put, this is the annual average price. Depending on the volatility of the instrument, draw a corridor of about 50 points in each direction from the average. Closing the day candle outside the corridor signals a breakout.
Entry simple. Each time the candle opened on one side of the middle, and closed on the other side, and even beyond the corridor — we enter in the direction of the breakthrough. It will be a good candle with a length of 60 points minimum.
Also, get ready to keep drawdown. The movement is often followed by a guy.
Exit-no less important thing in trading strategies for beginners in the Forex market-is also simple. Hard stop-one hundred percent, it does not move under any circumstances — set on the moving average. If the price returns-then there was a false entry, lost a little more than the length of the signal candle. With the price movement set Trailing Stop, which follows the price at a distance of 60 points.
The strength of this strategy is simplicity and simplicity in execution. The candle is drawn once a day around midnight. Before going to bed scanned at least 50 pairs and went to bed. You don't have to look at the market all day. The next evening we checked again.
Carry trade - a simple Forex strategy
Carry trade is a fairly simple Forex strategy that is quite accessible to beginners for understanding. It has an official translation, but roughly means " postponement of trading."
The secret of successful use of this strategy is in detecting pairs with low volatility and pairs with a large interest rate differential. Especially if interest rates have changed recently. The fact is that high interest rates attract investors, and if capital flows into the country, its currency will grow in price.
Carry trade is also interesting because a large differential of nominal interest rates means large swaps. Thus, buying a currency with a high interest rate, you can not only sit on the fundamental trend, but also to collect profits just for holding a position.
Technical calculations are used to enter the market according to this strategy. Classically, the bullish market enters when the chart is at the bottom. In bear-when the market is under the ceiling.
Even as a novice trader, you should see how these two simple Forex strategies are built on completely different logic and follow almost opposite entry/exit rules.
Break-even Forex trading strategy
If you are a novice trader, you have probably already tried to find a system that would allow you to trade Forex without losses.
You are not the only one who is in search of such a strategy.
Thousands of traders are looking for an easy trading system that explains how to trade Forex without losses. Some traders even claim that they have revealed the secret.
Is there such a perfect strategy?
Here's a tip: Admiral Markets offers great educational webinars to help you learn how to trade, but a win-win Forex strategy is not included in their program.
A win-win Forex strategy-truth or myth?
We'll open the cards right away. There is no trading strategy that never leads to losses. It's not that no one has ever thought about it - the truth is that a strategy focused on the Forex market cannot be a strategy excluding the possibility of losses.
On the Internet, many say that there is a win-win Forex strategy for free
The only reason You haven't been able to find such a strategy is because it simply doesn't exist. Even if some trader invented a win-win Forex strategy, he would keep it a secret.
The essence of any strategy is to make a profit that exceeds the total amount of losses. The frequency and amount of profit depends on your own skills, knowledge and tactics, while losses are inevitable.
Some of the tools that professional traders use as indicators or oscillators can increase the chances of making a profit, but will never give a guarantee.
Time to give up?
Not hurry. Better focus on learning how to create a realistic Forex strategy because finding a win - win strategy is a waste of your time.
Forex strategy without losses - how to create it
Although there is no such thing as a win-win Forex strategy, it may seem that some traders have discovered the secret. There are traders who have a high profitability ratio. You may be tempted to copy their methods in the hope of getting similar results. However, these results are the result of hard work, skills and experience gained over the years.
Even if you made successful trades by copying expert traders, you wouldn't learn anything new.
As a beginner, You should be ready to try new things and plan your own trading strategies. First of all, it will help to determine what is right for you.
At the very least, you should consider three questions:
How well do you deal with losses?
Do you trust your own judgment?
Do you know how to admit your own mistakes?
Practicing with a demo account can help you answer these questions.
The only opportunity to trade Forex without losses
The concept of a perfect Forex strategy is very attractive. In fact, there is only one way to win - win Forex trading, and it's really simple-to avoid trading entirely.
By its nature, currency trading has always been synonymous with risk. If the possibility of a loss is completely ruled out for you, then financial trading is definitely not for you. As with any other activity, mistakes in trading should improve your level.
How to find out what the best Forex trading strategy will suit you
Many technical indicators have been developed over the years. Big leaps forward made with the use of online trading technology have made them much more accessible to people, it has become possible to create your own indicators and systems.
You can learn more about technical indicators by visiting our educational section or the trading platforms we offer.
You need to learn Forex trading strategies that best suit your own style.Don't stop and try your strategies without risk on our demo account.
Summing up-a win-Win Forex trading strategy
If you want to succeed in the Forex market, You need to keep in mind one thing: there is no easy alternative to discipline and patience.
If you continue to think of Forex trading as a leisure or a fast track to wealth, you will not succeed. Forex trading can be profitable, but your results will always be accompanied by risk.